Trina Solar Limited (Trina Solar) has reported net revenues of $132.1 million for the first quarter of 2009, up 9.5%, compared with the net revenues of $120.7 million in the year-ago quarter. It also reported a net loss of $10.6 million, or $0.423 per diluted share, for the first quarter of 2009, compared with the net income of $12.9 million, or $0.512 per diluted share, in the year-ago quarter.
First Quarter 2009 Financial and Operating Highlights:
Solar module shipments were 48.8 megawatt (MW), compared to the company’s previous guidance of 50 MW to 55 MW, representing a decrease of 15.3% sequentially and an increase of 65.5% year-over-year
Gross margin was 17.2%, exceeding the company’s previous guidance of between 15% and 17%, compared to 9.6% in the fourth quarter of 2008
Operating income and operating margin were $6.8 million and 5.2% respectively, compared to $3.9 million and 1.8% respectively in the fourth quarter of 2008
Net loss was $10.6 million, which includes
A $6.5 million tax liability accrued in the first quarter resulting from a reversal in the government’s approval for a past tax holiday
A charge of $4.6 million for the estimated cost in connection with the cancellation of two polysilicon supply agreements
Earnings per fully-diluted ADS was negative $0.42, which includes a negative impact of $0.44 per fully diluted ADS for the above reasons
The company’s first quarter was adversely affected by unusually harsh weather in the company’s key European markets, tightened credit conditions for the company’s customers and the general slowdown in world economic activities, said Jifan Gao, chairman and chief executive officer of Trina Solar. Improved conditions beginning in April have contributed to increasing customer deliveries and higher levels of new contracts and projects.
In conjunction with the company’s recent visits involving over 30 meetings with the company’s customers worldwide, the company received positive feedback confirming satisfaction with the company’s high quality products and greater recognition of the company’s brand name. The company’s core strengths such as enhanced brand recognition, high quality products and industry leading low cost platform enable us to yield attractive margins in both new and existing PV markets, despite challenging market and macroeconomic conditions. In the first quarter, the company continued to leverage the company’s low cost platform by reducing the company’s manufacturing cost to around $0.79 per watt for the company’s multicrystalline product.
Moreover, the company remains committed to ensuring that the company has sufficient financial resources to maintain a strong balance sheet. In line with the company’s focus on maintaining a strong cash position, the company has increased the company’s in-house production capacities for cells and modules to over 400 MW as of May 2009, as a result of improvements in production process enhancements and improved cell conversion efficiency, which required minimal capital investment.
Finally, the company is encouraged by recent announcements by the Ministry of Finance, outlining China’s national solar investment subsidy program, which is expected to commence this year. The company is also involved in the development of a local Jiangsu subsidy program, which is viewed as a model provincial incentive program to potentially compliment the national subsidies. The company is confident that the company’s Changzhou presence will give us access to project opportunities created by these programs. To-date the company has submitted 8 initial proposals for the national subsidy program in the company’s name and through project joint venture.
In addition to the above, due to the current economic environment, the company is continuing to focus on improvements in several areas, including accelerating the reductions in the company’s manufacturing costs, increasing the company’s cell and module efficiencies, leveraging the company’s silicon procurement flexibilities, and expanding the company’s sales capabilities to capture growth opportunities in existing and emerging PV markets.
Recent Business Highlights:
During the first quarter of 2009, the company:
Continued to benefit from strong customer loyalty from its well- established PV partners throughout Europe and worldwide, whose businesses have greater visibility and access to commercial and project financing
Increased market share in growing PV markets such as Benelux, reflecting a diversification strategy that includes 20 established and emerging PV markets, such as Greece, the Czech Republic, Australia, and the US
Increased sales to project system integrators, which currently represent more than half of the company’s total sales
Continued to receive strong support from its Spanish partners who are increasingly active in developing projects outside of Spain
In April of 2009, the company:
Announced the completion of a 4.7 MW PV facility, one of the largest rooftop projects in Italy
Announced three new sales agreements in Germany totaling around 42 MW of PV modules for delivery in 2009, which has given the company greater visibility in its order book
Expanded its European Sales and Marketing team with the appointments of two key management positions. The company’s new managers have over 33 years of combined solar PV and other renewable energy experience.
Submitted proposals involving eight projects for China’s national subsidy program
First Quarter 2009 Results:
Net Revenues:
Trina Solar’s net revenues in the first quarter of 2009 were $132.1 million, a decrease of 38.9% sequentially and an increase of 9.5% year-over- year. Total shipments were 48.8 MW, compared to 57.6 MW in the fourth quarter of 2008 and 29.5 MW in the first quarter of 2008. The sequential decline in total shipments was mainly due to weakened demand given prolonged winter conditions in the company’s major European markets, limited customer visibilities to PV system purchase financing, and market inventory adjustments relating to government incentive reduction legislation in Spain. Net revenue includes around $2.3 million of non-module income.
Gross Profit and Margin:
Gross profit in the first quarter of 2009 was $22.7 million, compared to $20.8 million in the fourth quarter of 2008 and $31.1 million in the first quarter of 2008. Gross margin was 17.2% in the first quarter of 2009, representing an increase from 9.6% in the fourth quarter of 2008 and a decrease from 25.8% year-over-year. The sequential increase was due mainly to the benefits of lower average silicon purchase prices. The year-over-year decrease was mainly due to lower module average selling price resulting from demand factors, which included abnormal seasonality impacts, increased industry capacity and availabilities of silicon feedstock, and the recent global economic and financial climate. The company continued to focus its efforts on reducing its manufacturing cost per watt through ongoing efficiency gains linked to improved supply chain management, higher cell and module efficiencies, and proprietary process enhancements in the company’s ingot, wafer, cell and module value areas.
Operating Expense, Income and Margin:
Operating expenses in the first quarter of 2009 were $15.9 million. The company’s operating expenses accounted for 12.0% of its first quarter net revenues, an increase from 7.8% in the fourth quarter of 2008 and an increase from 9.0% in the first quarter of 2008. The sequential increase was a percentage of revenue as mainly due to the decline in total net revenues. Operating expenses in the first quarter of 2009 included $1.0 million in share-based compensation expenses, compared to $1.0 million in the fourth quarter of 2008 and $1.3 million in the first quarter of 2008.
Operating expenses include a charge of $4.6 million in connection with the estimated cancellation cost of two polysilicon supply agreements. Operating income in the first quarter of 2009 was $6.8 million, compared to $3.9 million in the fourth quarter of 2008 and $20.2 million in the first quarter of 2008. Operating margin was 5.2% in the first quarter of 2009, compared to 1.8% in the fourth quarter of 2008 and 16.7% in the first quarter of 2008.